Apr 06, 2021

Long-term care - the missing link in your financial plan

Senior care is often overlooked in retirement plans. This could be rooted in the misconception that the government will cover the care we need, so no further planning is required. Robert Bradburn, AVP Wealth Advisory Services, discusses the cost of post-retirement care and critical considerations to address when making decisions regarding your insurance plan.

In a recent production of What They Don’t Tell You, host Anna Premyslova skillfully dove into a conversation that many wealth managers tend to overlook – senior care planning.

 

Standard financial plans typically focus on matching cash flows to expenses, efficient withdrawals from holding companies, philanthropy and generational wealth transfer, while senior care planning is often overlooked. This may be rooted in the common misconception that government health care will provide all that’s needed for long-term care as we age, so no further planning is needed. This is a critical error.

 

The cost of care

According to the Canadian Life and Health Insurance Association (CHLIA) in A Guide to Long-Term Care Insurance, over the next 35 years the cost of long-term care in Canada will rise to $1.2 trillion – and only half of that is covered by current government programs. Further, by 2036 one out of every four Canadians will be over 65 years old, so the burden on government resources will be a heavy one to bear. Today, elderly lifestyle assistance can be found for a spectrum of needs: from everyday activities like house keeping, personal shoppers and companions, to ongoing longer-term supports like independent living retirement homes, dementia care facilities or in-home caregivers. Some of these may qualify for government assistance while others may not.

 

A quick search of senior care homes in Canada shows a range of facilities, programs and costs ranging from $2,450 in Strathmore Alberta to $5,400 in Toronto. The table below is featured in CLHIA’s guide to long-term care in other regions of Canada.

 

Figure 1: Cost of retirement homes/residences (no government subsidy) by province per month

Jurisdiction Private One bedroom suite
Alberta $953 - $4,285 $2,658 - $4,440
B.C. $995 - $3,500 $1,595 - $5,400
Manitoba $1,359 - $2,475 $1,690 - $3,300
New Brunswick $800 - $2,533 $1,943 - $3,500
Newfoundland1 $1,500 - $1,800 $1,065 - $4,200
Nova Scotia $1,705 - $3,100 $1,900 - $3,490
Ontario $1,236 - $6,000 $1,849 - $8,000
P.E.I.1 $1,825 - $2,880 $1,950 - $3,750
Quebec $850 - $6,700 $750 - $2,500
 Saskatchewan $1,380 - $3,700 $1,200 - $4,300

1Described as semi-private and private

Source: LifeStageCareTM

 

Costs for ongoing care and other programs can quickly erode one’s nest egg and create anxiety both for those in care and their loved ones. As the financial planner for many of my extended family members, I know this to be all too true.

 

Thankfully, for those requiring assisted care, there is some reliable relief from certain costs that can be obtained by purchasing long-term care insurance. Generally speaking, long-term care policies pay benefits when an insured individual can no longer perform at least two of the following activities of daily living:

  • Transferring body weight (getting up out of bed or a chair unassisted) 
  • Toileting Maintaining continence
  • Dressing
  • Bathing
  • Eating
  • Dementia or other cognitive impairments, depending on coverage

After an assessment by medical professionals, the insured may qualify for benefits as described by the terms of the policy.

 

The rise of relief

Long-term care insurance is becoming more popular as many Canadians are now helping their aging parents transition from their home to a care facility.

As costs rise and stress mounts, these family helpers are turning to the relief provided by insurance for an additional layer of financial security for their own future needs.

This sort of coverage should be on everybody’s radar, but is especially important for those who do not have close friends or family living nearby, or who simply wish to maintain greater independence as they age.

 

A number of insurance providers across Canada have variations of long-term care coverage plans. Accessibility varies based on age, medical/family history, types of coverage sought and time frame. SunLife, for example, offers policies to individuals between the ages of 21 and 80 years of age, with a minimum weekly benefit amount of $150 and a maximum of $2,300. The length of time the benefit will be paid can vary from 100 weeks to an unlimited length of time.

 

The weekly income benefits can be used to help pay the costs of care facilities, in-home nurses or even to reimburse family members providing regular care and assistance. Other types of plans will reimburse expenses paid for care up to a certain dollar amount. Additional features such as inflation protection and refundable premium on death are also available.

 

Like most insurance coverage, the required investment goes up as you age and as health deteriorates. For example, a $1,000 weekly benefit for a 45-year-old male non-smoker with a benefit period of 250 weeks requires a contribution of $1,175/yr. The same coverage amount and benefit period for a 55-year-old non-smoking male goes up to $2,001/yr.

 

This is only one of several considerations that will affect the way an insurance plan is designed to fit with your needs. If you’re curious to know what a plan might look like that speaks to your specific situation, it’s worth having a short conversation to learn how you can better secure your wellness needs and comfort down the road. We can help.